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Category Life Insurance

In for the long haul

05 July 2006 Angelo Coppola

Old Mutual has announced that they will be enhancing some benefits for a portion of its policies, and at the same time announcing a new Rolls Royce funeral product aimed at the higher end of the mass market segment.

The R170m worth of enhanced benefits will be provided by Old Mutual Group Schemes to some 270 000 policies that fall within their Family Funeral Plan option, which are part of their mass market sector.

Interestingly the enhancement is only for those policies sold between January 1999 and October 2001. The reason for the period is simple the product was launched and marketed over that period, with the next generation product hitting the streets at the end of 2001.

While the spokespeople said they werent aware of any outside pressure to modify or enhance these products, there is talk that at least one consumer rights organization is due to make recommendations to the authorities, concerning funeral plans.

It also appears that the R170m cost will be borne by the shareholders.

In terms of the broker involvement developed a salaried sales force more than 30 years ago says the head of the mass market retail market Marshall Rapiya.

It reduces the commission burden and added to which they looked for staff in the communities they were targeting. The salaried angle was to encourage a service ethic, as apposed to a sales ethic, says Rapiya.

Secondly they developed a controlled marketing plan essentially telling the sales people where they could operate, while they were employed by Old Mutual. This to develop and maintain that trust approach, with the communities within which they sell.

Rapiya says that the 1800 advisors are signing up 5.6 policies per week per advisor, in the areas they have been assigned to. These are impressive numbers by any standards.

In terms of the benefits and the R170m the company has extended it beyond their normal retirement age (NRA) provision. In the past there was no funeral cover if a person lived to older than the NRA.

So Old Mutual has decided to make the policy 50% paid up at NRA, to provide some cash pay-out when a designated person dies. The company has also extended their cover for the spouse and children who die prior to reaching NRA.

There used to be a 50% paid-up benefit, available to the spouse and children for five years. This benefit has been extended for the rest of their lives.

Rapiya says that his is a smallish business, but he claims that they are the fastest growing business in the group, displaying some 15% to 20% in compound growth, per annum for the past five years.

The numbers are also interesting, with some R2.5bn in recurring premiums, while last years claims were in the region of R1bn. On the other hand the claims since 1989 are in the region of R7.8bn in claims paid out. Rapiya says there are 1.2m customers on their books.

Editors thoughts:
* How will the money come back to the shareholders?
* One wonders what happened to the commission element in the new product development lifecycle could that be going back to shareholders?
* Making salespeople accountable to their clients is not a new idea.

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